Balancing Act: Long Term vs Short Term Orientation in Business

Long Term vs Short Term Orientation in Business Strategy Leadership and Management

The Introduction is a crucial part of any research paper or article. It sets the stage and creates interest by describing the problem or question you are trying to answer.

Many managers choose short term strategies because their annual bonuses are linked to their short term plans and performance. This makes it difficult for them to practice long term strategic intent.

Defining Long Term and Short Term Orientation

A society’s time orientation refers to its values and beliefs regarding how time should be viewed and utilised. For example, some societies value tradition and take a long time to build relationships, while others have a more short term outlook. In business, it’s important to define and understand these factors to determine if they impact your organisation.

One way to measure a culture’s long term versus short term orientation is by analyzing their cultural dimensions, which impact various aspects of the business environment. For example, the long term versus short term orientation dimension determines whether the values of the society embrace goodness and upliftment, or are limited to personal gain. This dimension has a major influence on how businesses operate.

According to Hofstede’s model, East Asian countries score high on the long term versus short term orientation scale, while Islamic nations are among the lowest in this category. Those who score high on this dimension are said to have a long term perspective of life, where good and evil are relative rather than absolute, and where they invest in the future.

SMEs are also known to prioritize the short term, as they have smaller customized capacity and can be more flexible than larger companies. This strategy allows them to develop closer relationships with their customers, allowing them to understand their needs and expectations better.

In addition, SMEs have the advantage of being able to operate in a manner that is more similar to the marketplace, allowing them to create innovative solutions that meet the needs of their clients and potential customers. This tactical approach to running a business has helped SMEs become more efficient, enabling them to deliver on their promises and commitments while maintaining long term profitability.

Cultural Impacts on Time Orientation in Business

Many factors impact the long-term vs short-term orientation in business. For example, cultural differences directly affect how a company prioritizes its strategies and objectives. In particular, one factor that influences a company’s short-term focus is the dominant Western bonus system for managers, which encourages them to make decisions for personal gain over company benefit. Similarly, a company’s chronemics – how it views time – can also impact its decision-making processes and strategic orientation. For example, monochronic cultures tend to be more deadline-driven and task-oriented when it comes to negotiations or projects, while polychronic cultures tend to be more interaction-oriented and less focused on the final outcome of the project.

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Other factors influence a company’s long-term orientation, including its values, societal norms and the perception of time. For example, a culture’s long-term orientation is influenced by its perceived time horizon, which is how long it takes for a society to achieve certain goals. It is also affected by the indulgence vs restraint dimension, which measures how much a society allows for its desires and urges, such as enjoyment of life or material wealth.

Countries with a high future orientation value investments that will pay off in the long run and prioritize delaying gratification. They also emphasize family and community, as well as traditional values and respect for elders. In contrast, societies with a low future orientation are more concerned with immediate successes and gaining monetary wealth. They may also be more likely to exhibit a sense of powerlessness and an external locus of control. This is not to say that companies with a lower future orientation cannot be successful, but rather that they should have a clear strategy for achieving their goals.

Strategies for Effective Long Term Orientation

In the short term, it may seem that adherence to long term orientation strategies in business is a futile endeavour. After all, the business landscape is always changing. The recent COVID-19 pandemic caused massive swathes of business to come to a halt for over a year, and many managers feel that they need the ability to be agile in a rapidly changing environment, so thinking and strategizing for the long term can seem impractical.

It has been argued that the reason why some managers resort to short-term orientation strategies is because of the way their annual bonus is rewarded by their respective organisations. Those that are oriented toward the long term may find themselves competing against those who prioritize personal gain over company benefit, and these individuals will likely be more interested in a formally structured, familial structure where they are treated more like colleagues. They will also be more interested in training and development opportunities that can improve their career prospects with the company.

Taking the long-term view in business can be difficult for all of us, especially those who are used to the fast pace of the modern world. Thankfully, many things can be done to encourage long term orientation within companies. The most obvious is to make sure that all employees understand the benefits that the long-term perspective will have on their careers and future with the company.

In order to make sure that all employees are on board with the importance of long term orientation, it is important to have an effective communication strategy in place. One of the most effective ways to do this is to have regular meetings with employees to discuss any concerns or issues regarding the company’s vision and mission.

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The Benefits of a Short Term Approach

The balancing act is an important part of life. You perform it when you have

competing priorities, such as a job, a family, and children care.

Businesses also have a balancing act to perform, as they have to meet urgent operational and financial needs while maintaining their long-term goals. This can include dealing with an unexpected business disruption, a sudden need to respond to the market, or dealing with problems that arise with customers or suppliers.

Companies that are focused on short-term gains will often focus on meeting quarterly earnings targets while neglecting long term strategies, investments and development. This can lead to low levels of revenue growth and economic profit compared to longer term oriented companies. It also limits the ability of companies to survive economic crises, as they will be less prepared to adapt to changes in the economy or industry. This is the result of a lack of strategic planning and investment in people, technology and infrastructure. McKinsey found that companies with a strong long-term orientation have higher revenue growth, more stable earnings, and are better prepared for an economic downturn.

Integrating Long Term and Short Term Goals for Success

Despite the apparent conflicts between long-term and short-term goals, they can be successfully integrated into your business strategy. This requires a clear understanding of each goal and how they work together in your plan.

Long term goals are strategic and focus on the future of your company. They can range from one to ten years and drive your company closer to its vision. They are also more flexible because they can be adjusted to accommodate changes in technology and environmental factors.

Short term goals are tactical and focus on the immediate future. They can be measurable and have specific timelines, ranging from a week to a year, depending on the project and your preferences. They are a great way to promote productivity and good time management, as well as ensure that you can accomplish your goals within the allotted timeframe.

Many managers focus on short-term goals, as their annual bonuses are tied to the implementation and success of their strategies. This can be a strong motivation, particularly for those who are new to the industry.

Ideally, both long-term and short-term goals should be incorporated into your overall company mission, ensuring that the big picture is not lost. This will help you keep your focus while ensuring your employees and investors are happy. While it may take longer to achieve your long-term goals, they will bring a greater sense of purpose and achievement. In the end, it is all about value, and if your long-term goals provide you with that, then it’s worth the wait. Just like baking a cake, it takes various steps and ingredients to achieve the desired result.

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